ITAT Quashes Reopening as Notice Issued Beyond Three-Year Limit:

The appeal was filed by Venelec Electromech Industries Pvt. Ltd. against the order of the CIT(A) dated 20 June 2025, arising from proceedings initiated under Sections 147 and 144 of the Income Tax Act, 1961.

The AO had issued a notice under Section 148 on 31 March 2023 in respect of AY 2016-17, which was admittedly beyond three years from the end of the relevant assessment year. The applicability of the extended limitation under Section 149(1)(b) therefore depended upon whether the alleged escaped income amounted to or was likely to amount to Rs 50 lakh or more. The AO had alleged escapement of income of Rs 55,22,250, after considering repayments to M/s Mysore Finlease Private Limited.

The Tribunal observed that the Rs 15 lakh opening balance represented the closing figure of the preceding assessment year and, therefore, could not be treated as income escaping assessment for the relevant previous year. The Tribunal further held that once the opening balance of Rs 15 lakh was excluded, the alleged escaped income fell below the Rs 50 lakh threshold prescribed under Section 149(1)(b). 

Accordingly, the Tribunal quashed the reopening as being in violation of Section 149(1)(b) of the Act. Since the reassessment itself was held invalid, the remaining issues on merits were rendered academic.